A Review of developments in

Global & Indian Steel Industry

Bi-monthly edition

Issue I

November 2015 (for the period September–October 2015)

Strictly for internal circulation

Our eight Full Members are:

• Steel Authority of India Ltd.

• Tata Steel Ltd.

• JSW Steel Ltd.

• Rashtriya Ispat Nigam Ltd.

• Essar Steel Ltd.

• Jindal Steel & Power Ltd.

• Bhushan Power & Steel Ltd.

• Bhushan Steel & Strips Ltd.

Our six Affiliate Members are, Monnet

Steel, INSDAG (Institute for Steel

Development and Growth), KISMA

(Karnataka Iron and Steel

Manufacturer’s Association), Gerdau

Steel, Visa Steel & Jindal Stainless.

About Indian Steel Association

Slide No.

CONTENTS

RAW MATERIAL related 4

PRODUCTION related 7

CONSUMPTION related 11

IMPORT related 13

EXPORT related 15

SHIPPING related 17

TRADE related 19

COMPANY related 23

PRICE related 26

ECONOMY related 29

RAW MATERIAL related

Source: International Energy Agency; World Bank

Coal & Natural Gas related Outlook

5

• In its Quarterly report titled ‘Commodity Markets Outlook’ released in October 2015,

the World Bank has stated:

“Coal prices are expected to decline 17 percent in 2015 to $50/ton

on continued surplus supply.”

• As per Citi analysis, for Newcastle 6,000 kcal/kg NAR thermal coal, an average price of

$56/mt FOB for the immediate October-December 2015 period is being forecasted.

The price shall recover slightly to $60/mt for 2016.

• Research from Macquarie, has forecasted that Chinese 2016 coal imports could drop

by around 25 MT and in the long term it was possible they could fall to zero.

• On October 14, 2015, the International Energy Agency (IEA) released a report titled

‘the Southeast Energy Asia Outlook 2015’.The main findings are as follows:

• Coal demand will expand at the fastest rate among all energy sources and reach 440

Mtce in 2040, a level comparable only to India today.

• In terms of electricity demand, the share of coal in power generation to rise from 32

percent to 50 percent; gas will experience the opposite trend declining from current

levels of 44 percent to 22 percent.

Source: Secondary research

Iron Ore Forecasts

6

• Citigroup Inc. has forecasted that prices will drop below $40 by March 2016 as supply

will jump while steel output contracts.

• Goldman Sachs Asset Management Australia is underweight the iron ore sector, with

the bank forecasting prices below $50 on a long-term view.

• Iron ore will rebound in 2016 as China steps up efforts to support the economy

including further cuts in interest rates, according to Prestige Economics LLC, with

prices trading between $58 and $68 a metric ton in 2016.

• HSBC Holdings Plc, has stated that it expects prices to trade between $50 and $60

over 2016, citing prospects for less local supply.

• UBS forecasts for iron ore are $US53 a tonne in the fourth quarter of 2015 and

$US51 in the first quarter of 2016, with an overall 2016 forecast of $US52.

• ANZ has taken a bearish stance stating that iron ore would "dabble in the high

$US40s" for the rest of 2015.

PRODUCTION related

Source: World Steel Association

Crude Steel Output touched 130 MT in Sep’15,

States World Steel Association

According to World Steel Association, the world crude steel output by 66 countries

totalled 130.93 MT for the month of September 2015. Output of the top 10 countries is

given below:

Rank Nation Output (in ‘000 tonnes)

1 China 66,120

2 Japan 8,573

3 India 7,261

4 United States 6,682

5 South Korea 5,615

6 Russia 5,528

7 Germany 3,379

8 Brazil 2,501

9 Turkey 2,489

10 Italy 2,083

8

Source: World Steel Association

Crude Steel Output by South American Nations

Declines in Sep 2015

9

According to World Steel Association, the crude steel production by South American

countries edged lower significantly during the month of September 2015. The total

monthly output declined by 8.6% to 3.467 MT.

Country 9 months (2015) 9 months (2014) % Change

Argentina 3,783 4,103 -7.8

Brazil 25,253 25,556 -1.2

Chile 830 813 +2.1

Colombia 896 921 -2.7

Ecuador 510 499 +2.2

Paraguay 33 32 +3.9

Peru 831 801 +3.8

Uruguay 66 63 +5.3

Venezuela 1,148 1,033 +11.1

Source: World Steel Association

Crude Steel Output by EU-28 countries

Declines in Sep 2015

10

According to World Steel Association, the crude steel production by EU-28 countries

declined by 4.6% during the month of September year-on-year. The output by the region

totalled 13.571 MT during the month.Country 9 months (2015) 9 months (2014) % Change

Austria 5,768 5,876 -1.8

Belgium 5,671 5,538 +2.4

Bulgaria 473 461 +2.6

Croatia 109 151 -27.8

Czech Republic 4,046 4,015 +0.8

Finland 3,028 2,851 +6.2

France 11,656 12,167 -4.2

Germany 32,572 32,553 +0.1

Greece 787 752 +4.7

Hungary 1,295 773 +67.5

Italy 16,728 18,350 -8.8

Luxembourg 1,630 1,664 -2.0

Netherlands 5,333 5,158 +3.4

Poland 7,067 6,426 +10.0

Slovakia 3,538 3,427 +3.2

Slovenia 465 477 -2.6

Spain 11,361 10,789 +5.3

Sweden 3,269 3,360 -2.7

United Kingdom 8,611 9,313 -7.5

CONSUMPTION related

Source: Secondary research; World Steel Association; Joint Plant Committee

Indian Steel Consumption Forecasts

12

• Domestic steel consumption in September 2015 (6.2 MT) declined by 5.2 percent

compared to August 2015 and increased by 5 percent compared to September 2014, as

per Joint Plant Committee, Ministry of Steel.

• In its report titled ‘The Mettle Of India’s Steel Industry Is Being Tested.’, Standard &

Poor's Ratings Services has stated that India’s Steel consumption can increase by 9 per

cent-10 per cent in 2016-17 and 2017-18, if economic growth accelerates.

• The World Steel Association (WSA) stated that India is the silver lining in an otherwise

gloomy global steel market.

o WSA, in its Short Range Outlook (SRO) forecast issued in October 2015, forecast

the demand for steel in India to go up by 110 basis points (bps) in 2015 to 7.3%

and by another 30 bps in 2016.

o Indian steel demand in 2015 is to rise to 81.5 MT from 75.9 MT in 2014.

o WSA says its use will further improve by 7.6 per cent to 87.6 MT in 2016.

IMPORT related

Source: Korea Iron & Steel Association

Korea’s Steel Imports

Dip a 10 percent in September 2015

14

• On account of the ongoing recession in the domestic shipbuilding industry, steel

imports by Korea decreased by 9.9 percent and 10.7 percent from a year ago and a

month ago in September 2015, to 1.774 MT, respectively.

• By item, those of hot-rolled steel, thick plates, and zinc-coated steel sheets showed a

significant decline in particular.

• When it comes to thick plates, which are closely related to the shipbuilding industry,

imports recorded a 48.7 percent year-on-year decrease to 171,000 tons.

EXPORT related

Source: Japan Iron & Steel Federation

Japan Exports Iron & Steel

products to the tune of 3.3 MT in sep 2015

16

Sep 2015

(in tons)

Sep/ Aug15

(%)

Pig iron 992 127.1

Ferroalloy 21,269 125.8

Ingots 1,185 40.2

Semi-finished products 413,182 116.9

Ordinary steel products - Total 2,266,438 96.7

Stainless steel 85,297 100.7

Other specialty steel 482,248 85.9

Specialty steel products - Total 567,545 87.8

Steel wire 18,852 104.1

Other secondary products 35,901 110

Secondary steel products - Total 54,754 107.9

Others * 3,641 36.4

Total iron and steel products 3,334,486 97.2

"Others" consist of clad plate and cast-iron pipes.

SHIPPING related

Source: Shipping Watch

Bleak Prospects for the Dry Bulk Sector in 2016,

Says JP Morgan

18

JP Morgan, in its report, titled ‘International Dry Bulk Shipping - Initiating Coverage of the Dry

Bulk Shipping Industry’ states the following:

"We expect that 2016 could become an even worse year than the

historically low 2015"

• The primary reason for the dry bulk downturn is the slowdown of the Chinese

economy.

• The bank estimates that China, going forward, will have a more consumer-driven

economy rather than the investment-heavy economy that has resulted in high growth

rates for the past many years.

• As China lowers its coal consumption, the bank estimates that Indian will be the

biggest coal importer in 2015.

TRADE related

Source: Secondary Research

Recap of Trade Measures, Actions & Disputes

20

• On October 29, 2015, the European Union imposed five-year trade protection from

the U.S., Russia, Japan, China and South Korea, fixing minimum-import prices on

shipments of grain-oriented electrical steel -- or GOES -- until late 2020 [The

Commission Implementing Regulation (EU) 2015/1953]

• On October 28, 2015, antidumping (AD) petitions were filed with the U.S. Department

of Commerce (DOC) and U.S. International Trade Commission (ITC), regarding

circular welded carbon-quality steel pipe from the Sultanate of Oman, Pakistan, the

Philippines, the United Arab Emirates (UAE), andVietnam.

• On October 21, 2015, Australia’s Anti-dumping Commission decided to terminate its

anti dumping duty against rebar imports from Malaysia,Thailand and Turkey.

• On October 15, 2015, Australia’s Anti-dumping Commission announced that it has

been granted more time by the Australian government to assess the market situation

and material injury claims pertaining to anti dumping investigation against Chinese

rebar imports.

Source: Secondary Research

Recap of Trade Measures, Actions & Disputes

21

• In October 2015, with respect to the Sunset Review (SSR) initiated in April 2014

pertaining to anti-dumping investigation concerning imports of “Cold-rolled Flat

products of stainless steel” from the People’s Republic of China, Republic of Korea, the

European Union, South Africa, Chinese Taipei, Thailand and the United States of

America, the Directorate General of Anti Dumping & Allied Duties (DGAD) of India

recommended extension of anti-dumping duty on the said product for another five

years.

• On October 14, 2015, the WTO Appellate Body ruled against China and issued reports

in the cases “China – Measures Imposing Anti-Dumping Duties on High-Performance

Stainless Steel SeamlessTubes” from Japan and the European Union.

• In early October 2015, Vietnam Steel Association (VSA) stated that cheap steel ingots

from China were flooding the domestic market and that several exporters cheated to

enjoy tax rate gaps.

o During August and September 2015, VSA said parts of steel ingots from China

were added with chrome to be turned into alloy to enjoy zero tax rate

o The Ministry of Finance has moved a recommendation to introduce a 10 percent

tax, imported steel with at least 0.3 percent of chrome content

Source: Secondary Research

Recap of Trade Measures, Actions & Disputes

22

• On September 29, 2015, Mexico's Ministry of Economy announced, that the import

duty for steel products has been temporarily set at 15 percent. The measure will

remain in place for six months and will apply to imports from countries with which

Mexico has no trade agreements.

• On September 25, 2015, Malaysia terminated an anti-dumping investigation into

imports of stainless steel cold rolled coil (CRC) and sheet from China, Finland, France,

Hong Kong, Japan, Indonesia, South Korea,Taiwan andVietnam.

• According to a notification published on the Thai Royal Gazette on September 11,

2015, Thailand would begin to collect provisional duties of up to 34.44% on low carbon

wire rod imported from China for a period of four months from September 12, 2015.

• On September 10, 2015, India’s Ministry of Commerce recommended a 20 percent ad

valorem safeguard duty on imports of hot rolled coils of width 600 mm and more for a

period of 200 days.

COMPANY related

Source: Nikkei Asian Review; Secondary Research

Profits of Japanese Steel Makers

May ERODE for 2015-16

24

• Nippon Steel & Sumitomo Metal is reported to record a pre-tax profit topping 300

billion yen ($2.48 billion) for the fiscal year ending March 2016, a roughly 30 percent

decline on the year.

o Nippon Steel, which exports nearly half its output, is particularly exposed to

skewed overseas market dynamics.

o Nippon Steel has also been slow to recover domestically.

o Producing more than 40 MT of crude steel annually, the company went on a

production slowdown beginning April 2015 in response to overloaded inventories.

• Japan’s no. 2 mill JFE Holdings halved its forecast for current profit to 100 billion yen.

o JFE plans to produce 27.7 MT of crude steel in the year to March 2016, against

28.44 million tonnes a year earlier.

• Forced to compete against cheap Chinese steel, Japanese steelmakers are struggling to

make a profit on exports even amid the weak yen.

Source: China Iron & Steel Association; News articles

Chinese Steelmakers Struggle

On Contracting Demand & Shrinking Prices

25

• Third-quarter profits for Hebei Iron & Steel Co., China’s largest producer, shrank after

sales fell 25 percent.

• Baoshan Iron & Steel Co., China’s second-largest mill by output, reported a net loss of

920.5 million yuan ($145 million) in the three months to September compared with

profit of 1.86 billion yuan a year ago.

o Sales fell 10 percent, and the full-year profit could fall between 50 and 100

percent.

• Maanshan Iron and Steel Co. reported a net loss of 1.34 billion yuan from a profit a

year ago.

• Angang Steel Co. expects to swing to a loss in the third quarter.

• Sinosteel Co., a state-owned steel trader, failed to pay interest due on bonds.

• Medium and large-sized mills incurred losses of 28.1 billion yuan in the first nine

months of this year, according to CISA.

PRICE related

Source: China Iron & Steel Association

Steel Price Report – China

October 2015

Unit: yuan / tonne

Product Spec Beijing Tianjin Shenyang Shanghai Nanjing Jinan Zhengzhou Wuhan Guangzhou Nanning Kunming

Wire Rod

HPB300

Φ6.5m

m 2010 2070 2050 2100 2250 2240 2100 2270 2200 2210 2410

Rebar

HRB400

Φ16m

m 1920 1910 2040 1960 2020 2010 2030 2070 2170 2190 2330

Angle Bar

Q235 5# 2210 2250 2200 2240 2370 2350 2220 2230 2470 2670 2600

Plate

Q235 20mm 1920 1940 1970 1960 1980 1960 1930 2000 2030 2230 2270

HRC

Q235 3.0mm 2030 2030 2130 2080 2080 2120 2120 2080 2130 2330 2360

CRS

SPCC 1.0mm 2800 2770 2900 2450 2510 2700 2600 2320 2500 2560 2750

as of October 19, 2015

27

Source: The Economist Intelligence Unit, Global Forecasting Service

Individual Commodity Price Forecasts

October 2015

as of October 22, 2015

2015 2016 2017 2018 2019 2020

Coal

(US$/tonne, Australia)58.6 61.1 65.4 67.0 66.0 67.0

Iron ore

(US$/dry metric tonne unit)55.0 57.0 59.0 60.0 62.0 64.0

Natural gas

(US$/mmBtu, US)3.1 3.7 3.9 4.0 4.1 3.1

Oil: Brent

(US$/barrel)

53.4 60.0 72.7 80.2 77.2 79.9

Steel

(US$/tonne)476.3 542.5 580.0 550.0 570.0 476.3

28

ECONOMY related

Source: The Economist Intelligence Unit; Global Forecasting Service

Economic Forecasts

October 2015

as of October 22, 2015

In % 2015 2016 2017 2018 2019 2020

IndiaReal GDP Growth 7.2 7.1 6.8 7.6 8.5 7.7

Inflation 5.6 5.9 5.8 5.5 5.6 5.5

ChinaReal GDP Growth 6.9 6.4 5.9 5.5 5.0 4.9

Inflation 1.7 2.4 2.4 2.2 1.9 1.9

U.S.AReal GDP Growth 2.5 2.4 2.4 2.5 1.4 2.2

Inflation 0.2 1.7 2.3 2.5 2.0 2.0

JapanReal GDP Growth 1.0 1.7 1.2 1.7 1.5 1.3

Inflation 1.0 1.4 2.2 1.9 1.6 1.6

Euro AreaReal GDP Growth 1.5 1.6 1.6 1.5 1.5 1.5

Consumer Price Inflation 0.1 1.5 2.0 2.1 2.1 2.0

30

Source: Reserve Bank of India

Deployment of Gross Bank Credit by RBI

October 2015

Report released on October 30, 2015;

Data on sectoral deployment of bank credit collected on a monthly basis from select 46 scheduled commercial banks, accounting for

about 95 per cent of the total non-food credit deployed by all scheduled commercial banks, for the month of September 2015.

Outstanding as on

(in INR billion)

Variation

(Year-on-Year)

Sr.Industry

Sep.20,

2013

Mar.21,

2014

Sep.19,

2014

Mar.20,

2015

Sep.18,

2015

Sep.19,

2014 /

Sep.20,

2013

Sep.18,

2015/

Sep.19,

2014

% %

2.13Basic Metal &

Metal Product3,357 3,608 3,582 3,854 3,899 6.7 8.8

2.13.1 Iron & Steel 2,534 2,674 2,651 2,834 2,907 4.6 9.6

2.13.2Other Metal & Metal

Product822 934 931 1,020 992 13.2 6.6

31

Source: Reserve Bank of India

Rates at Reserve Bank of India

October 2015

Reference Rate released on October 30, 2015; CRR – Cash Reserve Ration; SLR - Statutory Liquidity Ratio

CurrencyDate

October 29, 2015 October 30, 2015

I USD 65.1515 65.2231

1 EUR 71.2497 71.6671

1 GBP 99.3626 99.9348

100 YEN 53.93 53.92

Policy Repo Rate : 6.75%

Reverse Repo Rate : 5.75%

Marginal Standing Facility Rate : 7.75%

Bank Rate : 7.75%

Reference Rates

Policy Rates Reserve Ratios

CRR : 4%

SLR : 21.5%

32

THANK YOU

On behalf of Indian Steel Association,Ms. Ashima Tyagi

DISCLAIMER

The material in this presentation has been prepared by Indian Steel Association (ISA) and is a general background information reviewing the status of the

developments in the global and Indian steel industry as at the date of this presentation. This presentation is strictly for internal use of all the member

companies of ISA, whose names have been stated in the presentation.

Information is given in summary form and does not purport to be complete or all inclusive. The information has been sourced from independent third party

databases, knowledge sources and news reports, and the authenticity of the same has not been independently verified by ISA.

Additionally, any third party forecasts on financial information, projections or estimates should not be construed as advice or a recommendation to investors

or potential investors. Recipients of this presentation from member companies of the ISA should each make their own evaluation of the contents and

adequacy of the information contained in the presentation.

ISA does not undertake any obligation to publicly release any changes to any revisions, modifications or forward looking statements in the subsequent

editions of this bi-monthly presentation. Unless otherwise specified, all information is for the period September 2015 – October 2015.